Labour and Liberal Democrat negotiators have met for their first formal discussions on a possible coalition government after Prime Minister Gordon Brown sensationally announced he was stepping down as Labour leader.
Both sides described the talks in the House of Commons as "constructive" and it is expected that further discussions on a Lib/Lab pact will take place on Tuesday.
Mr Brown's announcement that Lib Dem leader Nick Clegg had requested formal talks with Labour shook Westminster after four days in which it appeared that the third party was coming close to a deal with Conservatives.
After David Cameron had addressed Conservative MPs on the developments, the Tories came out with a last-ditch bid to win Lib Dems back over to their side, making a final offer of a referendum on the Alternative Vote system to replace first-past-the-post for Westminster elections.
Meanwhile, speculation mounted over the Labour succession, with Foreign Secretary David Miliband, his brother the Energy Secretary Ed Miliband, Home Secretary Alan Johnson, deputy leader Harriet Harman and Schools Secretary Ed Balls all tipped as possible candidates for the leadership.
At a hastily-arranged Cabinet meeting in 10 Downing Street, the potential contenders agreed to hold back from announcing their candidacy until the resolution of talks over the future shape of the government.
David Miliband said: "We agreed as a Cabinet that no potential candidates would launch their campaigns or put forward their names until the vital business of securing a government for this country that can command a majority in the House of Commons is completed. Once that is completed then the Labour Party can get on with its business of electing a new leader."
Liberal Democrat MPs are meeting in the House of Commons to discuss the latest offers, which could see them enter government in a coalition with either Labour or Tories, with ministers at the Cabinet table. Arriving for the meeting, Mr Clegg told reporters: "We will try to make everything as clear as possible as soon as possible."
In his dramatic statement outside the door of 10 Downing Street earlier on Monday, Mr Brown announced he had asked the Labour Party to activate the formal mechanism to find a new leader, after insisting he was confident an administration could be formed with Lib Dem allies to command a majority in the Commons.
Mr Brown appeared to envisage remaining as Prime Minister in a power-sharing government with the Lib Dems for as long as four months, with his successor to be chosen by Labour's electoral college by the time of the party's annual conference in Manchester at the end of September.